In order to identify how much volatility you can handle in your portfolio, answer the following six hypothetical questions, and find your risk tolerance level.
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1. From September 2008 through November 2008, stocks lost more than 31% of their value.
If I owned a stock investment that lost about 31% of its value in three months, I would . . .
(If you owned stocks during this period, please select the answer that matches your actions
at that time.)
Buy more of the investment, as stocks now at low prices
Hold on to the investment and sell nothing
Sell some of the remaining investment
Sell all of the remaining investment
2. From an original
investment of $25,000, your portfolio has grown 100% to $50,000, but it
suddenly drops $10,000, down 20% (your portfolio is $40,000 now). How would you
react?
I would sell the investments entirely
I would make no adjustment to the investments in my portfolio, as markets downs and ups
I would make additional purchases in my portfolio, as stocks at low prices now
I would try to avoid the investment that might suddenly decline by 20%
3. Your portfolio, from
the previous question, is now worth $40,000, and it suddenly declines
another
$6,000 or 15%, (your portfolio is $34,000 now). How would you react?
I would sell the investments entirely
I would make no adjustment to the investments in my portfolio, as markets downs and ups
I would make additional purchases in my portfolio, as stocks at very low prices now
I would try to avoid the investment that might suddenly decline by 15%
4. The chart to the right shows the highest one-year loss and the
highest one-year gain on four different hypothetical investments of
$10,000.* Given the potential gain or loss in any one year, I would
invest my money in
Investment A
Investment B
Investment C
Investment D
5. If you could choose only one of the four portfolios characterized
below, which would you select?
6.The
bar charts below show annual rates of return earned by four hypothetical
investments over a ten year period. Each chart also shows the cumulative
value of an initial lump sum deposit of $50,000 made at the beginning of
year one, then held for ten years. Given the fluctuation of the returns
for these four investments and their ending values, which would you
choose?